Certain states require separate, special, reporting of federally tax exempt municipal securities, such as: bonds, mutual funds, money market funds, unit investment trusts, and more. State reporting requirements for federally tax exempt
interest varies per state but can include: exempt interest, exempt interest dividends, accrued interest received, accrued interest paid, tax exempt original issue discount, portfolio income distribution attributable per state and
territories, CUSIP number, and/or the security name.
Most of the previously listed data, which is required by the states, is already present across an assortment of federal 1099-INT, 1099-DIV, & 1099-OID tax forms – but not everything can be found there. Data, such as accrued
interest paid or portfolio income attributable to the state and US territories, can require extra research or services to uncover or provide. Many states also impose a $10 threshold, meaning that any recipient receiving less
than net $10 of exempt interest is not required to be reported.
States that require this type of federally tax exempt bond interest reporting generally have two requirements to complete their reporting mandates. Firstly, companies are required to notify their investors/clients that they
will be reporting this information. Notification is traditionally with a PDF copy of the information that is being reported to the state on their behalf. Secondly, states require that the reporting companies file this information,
in an electronic file format, which is then submitted directly to the state through a state website or portal – using an account that the company has setup with the state.